Babbitt Ranches: Governance and Strategic Planning in Family Business Jennifer Hocutt
In 1886, five Ohio born brothers ventured to Arizona and laid the foundation to a family owned business that would span five generations to date. Considered to be “one of the largest and most successful mercantile and ranching empires in Arizona and was the twenty-fifth largest landowner in the U.S.” (Majur and Savage, 2010, p. 2. Para.1) Originally known as the Babbitt Brothers Trading Company, later became Babbitt Ranches, encompassed 700,000 acres and is considered to be a successful and highly respected family-owned businesses in Arizona. Originally a small lumber store, the five brothers successfully grew the business into a mercantile and ranching company that also became eco-friendly and wildlife conscious contributors. Donating hundreds of parcels of land for the benefit of Nature Conservancy, Forest Legacy Program, Ecological Monitoring and Assessment Foundation, partnering with NOAA (the National Oceanic and Atmospheric Administration) to Assist in global warming monitoring and protecting the endangered black-footed ferret. These participatory measures reinforce the idea that Babbitt Ranches sought to be more than just a moneymaking business. With the longevity of the company came variances in family interest. The generations to follow the original brothers did not share the same views as their predecessors. While the second generation continued to work hard and invest in the future of the company, the third generation was more fiscally short-minded and did not value the long term investments, rather focusing on short term gain. Not all third generation members shared these views, which made decision-making more difficult. Provided the option to sell their stock back to the company, many family members sought other means to make a living. To regain cohesiveness and collaboration, a constitution was implemented on January 24, 2008 with the assistance of the current company president, Billy Cordasco and The Conversation Council, known as the Board of Directors for Babbitt Ranches. All ten (10) Conversation Council members are Babbitt family members. The main focus of the Constitution was to reinstate the philosophies and land stewardship originally embraced upon its foundation.
Points of Agreement
A more effective implementation of communication was necessary to ensure the livelihood of the company Members of the Conversation Council should include family members Non-family member employees are included in the communications pertaining to the goals and future of the company The Constitution is based on the foundation and values encompassed by the original Babbitt brothers. Providing third generation family members the option to sell their interest in the company back Moving beyond the ranch industry and partnering with Ecological foundations and groups that benefit from the usage of land The president oversees the daily operations and short-term decision making while the Conversation Board votes on the long-term business decisions and portfolio interests Points of Disagreement
Members of council serving on the board for thirty years
Voting of new incumbent council members by current board members Lack of measureable goals
Large number of shareholders (91) hinder the direction of the business The third generation shares are majority of decision makers while the fourth generation oversees the operations of the business. Points of Interest
Despite the longevity and loyalty of employees, who are not Babbitt family members, there was no indication that these individuals were granted any investment opportunity within the company. All stocks are family owned and are not offered to the general public, not even the long-term employees. It took four generations to enact a system of communication and decision-making. Any other family...
References: Majur, L., & Savage, K. (2010). Babbitt Ranches: Governance and Strategic Planning in Family Business. North American Case Research Association, 30(3), 24-24.
Thompson, L. L. (2014). Making the Team: A Guide for Managers (4th ed.). Upper Saddle River, NJ: Prentice Hall.
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